Lobbies as reality

It still continues to be so. But, slowly all this is changing across the globe thanks to democracy, good governance and a growing momentum for participating in the budget exercise. India is no exception even though it has not achieved what Brazil did during 1980’s by focusing on mass participation in deliberating public budgets to widen citizen engagement and oversight in which budget priorities would more closely correspond to local priorities and popular needs.

 

This experiment which began at Porto Alegre has been adopted by entire Latin America. Nevertheless, the process of budgetary making in India is no less democratic with Union finance minister interacting with various interest groups ahead of budget presentation every year. What is an interest group? The term interest group covers just about any collection of people trying to influence government. Some interest groups are transient, others permanent. Some focus on influencing a particular policy, others on broad changes. Some work through the executive or administrative agencies, others through the judicial or legislative sectors, and still others through public opinion. But all are non–publicly accountable organizations that attempt to promote shared private interests by influencing public policy outcomes.

 

This year too, the Union finance minister invited various interest groups as part of the pre-budgetary consultations with him at his office in the North Block where he hosted a luncheon meeting. These groups include farm sector, banking-finance-insurance sector, trade unions, economists, captains of industry, and social sector and finances ministers from various state governments on different dates.

 

There is no doubt that none of these stakeholders can be ignored by any government in India. Why? Because the Union Budget is a document that, once approved by the legislature, authorises the government to raise revenues, incur debts and effect expenditures in order to achieve certain goals.

 

Also the budget determines the origin and application of public financial resources; it plays a central role in the process of government, fulfilling economic, political, social, legal and administrative functions. So these interest groups lobby hard to sell their view points to the government. Traditionally India Inc representing the industry lobby are well organised and through their chambers try to get across to the government for tax concessions and policy changes that could lead for better investment to create employment opportunities.

 

This year too captains of industry who suffered on account of the tight monetary stance adopted by the Reserve Bank of India that had hiked interest rates about 13 times during the last few months, met finance minister Pranab Mukherjee after a few weeks accusing the government of a policy paralysis. B. Muthuraman from CII, R.V. Kanoria from FICCI, R.N. Doot, Assocham, Y.C. Deveshwar, ITC Ltd.,Nitin Paranjpe, Hindustan Unilever Ltd., Tulsi R. Tanti, Suzlon Energy Ltd., B.P. Rao, BHEL, M. Rafeeq Ahmed, FIEO, Som Mittal, Nasscom were some of those who met Finance Minister for pre-budgetary consultations.

 

Most of the business leaders were in favour of reduction in interest rate at least by 50 basis points to send positive signals to the market, industry and the corporate world at large as well as to boost investor sentiments.

 

They also suggested widening the service tax base with a negative list and to exempt infrastructure sector companies and SEZ units from MAT. It was suggested to shift to accrual based budgeting from cash based budgeting for better outcome of money spent. It was suggested to revisit concept of dividend distribution tax. 

 

India Inc also proposed making tax evasion difficult and bring more items under the tax net, move to e-invoicing system, implement DTC in its entirety and clear funds held-up in tax litigation and disputes among others.

 

In order to boost the exports, it was suggested that interest rate for the MSME sector be kept at 7 per cent and for others at 9 per cent or subvention should be provided to all sectors of exports at least till 31st March, 2013. It also suggested that exports be included in priority sector lending by the banks.

 

These were some their demands. When pointed out that India Inc corners most of the benefits from the Union Budget and that most of their suggestions are accepted, a former FICCI secretary general D H Pai Panandikar refutes it.

“I have attended many of the pre-budget meetings as an economist and as well as part of the industry body (FICCI). Finance ministry makes assessment on suggestions given by different lobbies on how it would impact the overall economy or else it would only profit particular stakeholders. I would say hardly 20 to 25 may have been given due importance by the government,” Dr Panandikar told Governance Watch.

 

However he agrees that India Inc fancies calling for cuts in corporate tax. Corporate tax has been cut. “It was 50 per cent, now it is 30 per cent”, he adds. Let us turn to farm sector with which Pranab Mukherjee held a similar meeting. Those who attended include Dr. Ashok Gulati, Commission for Agriculture Costs and Prices, P. Chengal Reddy, Consortium of Indian Farmers Association and a dozen others. Their list of demands included rationalisation of the different subsidies, decentralisation of handling of food grains to ensure food security, priority to increase areas under edible oils and oil seeds and allocation of higher resources for this sector among others, tax exemptions to cooperative societies especially labour and housing cooperatives, defining cooperative banks as scheduled and non-scheduled banks, to impress upon States to remove mandi tax and purchase tax etc.

 

Experts and those who practise it feel the sector has been neglected by callous and successive governments and have left it at the mercy of monsoon. No wonder farm growth is far below the targeted 4 per cent for some years now.

Noted agricultural scientist and father of the Green Revolution Dr MS Swaminathan had noted in a recent interview: “Agriculture is looked upon by urban people from their own point of view of food security. Farmers’ lands are being acquired for building roads, malls et al. So how are we going to feed our population, which is 1.2 billion today and will be 1.5 billion by 2030?” he queries as the report of National Farmers Commission that gave several recommendations to boost farm productivity and farmers’ lot, is gathering dust somewhere. P Chengal Reddy, Secretary General, Consortium of Indian Farmer Association (CIFA) warned the government to be serious about tackling farm crisis rather than running popular schemes and remove controls in farm sector. 

 

“They are interested in implementing populist schemes like MNREGA and now they are planning to implement food security bill. What we are demanding are reforms in the farm sector. Why should there be controls in the farming sector?” Reddy questions. Demanding foreign direct investment in irrigation, Reddy asked Mukherjee as to why the government was liberal in FDI in sensitive sectors like Defence and Telecom and not agriculture.

 

The CIFA Secretary General also wanted investments in piggery, fisheries and diary to overcome the problem of malnutrition. Others point out that Union Budget can do little to improve farm growth. “The problem with farm sector is they are disorganised and decentralised,” points out Dr Panindaiker. Similarly trade unions too voiced their protests over rising inflation, demanded pension, employment generation and against disinvestment. Those who attended the meeting included Dipankar Mukherjee and Tapan Sen, MPs Rajya Sabha, Centre of Indian Trade Unions(CITU), R.A. Mittal, Hind Mazdoor Sabha, H. Mahadevan and D.L.Sachdev of All India Trade Union Congress (AITUC) among others. 

 

“We demanded assured pension for workers of the unorganised sector. Contract workers should get provident fund money... We spoke against disinvestment. PSU’s have Rs 6 lakh crore reserves. This money should be invested for employment generation,” CITU representative and Rajya Sabha member Dipankar Mukherjee noted. Will the UPA government give in to these suggestion, say for instance on disinvestment. What is perhaps holding back the government in not going ahead with disinvestment is poor market conditions.

 

The department of disinvestment is running against time to meet its ambitious disinvestment target of Rs 40,000 crore for the current fiscal. Till date it has been able to raise only Rs 1,145 crore through disinvestment in PFC. In order to fast track the disinvestment programme, the DoD had sought opinion of concerned ministries for buyback of shares and prepared a list of cash-rich PSUs in this regard. “Disinvestment will be decided by market conditions. 

 

So if market conditions are not normal, it is sensible for the government to hold back,” Deputy Planning Commission Dr Montek Singh Ahluwalia observed. So much for the poor Human Development Index in India, experts in the social sectors and leaders of civil society in their meeting stressed the need to address issues of malnutrition, skill development, infrastructure, higher investment on health, education, sanitation, housing and renewable energy among others. They emphasised the need for higher transparency and taxation benefits/relief to encourage development sector.

 

Even though schemes like the Mahatma Gandhi National Rural Employment Guarantee Scheme and massive farm loan waivers were announced during the last few budgets, one only hopes more welfare schemes targeted at women, children, unorganised workers and landless labourers. Ashok Khosla of Development Alternatives Group, Rajesh Tandon of PRIA, D.R. Mehta of JAIPUR FOOT, Amal Ganguli of HELP AGE, Dr. Rukmani Banerjee of PRATHAM, Ms. Achla Savysaachi of SA-DHAN, Ms. Rohini Nilekani of ARGHYAM, Swami Agnivesh of Bandhua Mukti Morcha (BMM) were some those who met the Finance Minister. A specific set of issues concern the politics of competition between states for access to budget resources. 

 

Participating in the pre-budgetary meet state finance ministers wanted the Centre to look at specific development programmes or plans in their states. Most states were keen to back recommendations of the B.K. Chaturvedi Committee Report pertaining to reducing the number of centrally sponsored and argued that the schemes should be implemented. Similarly, recommendations of Dr Rangarajan Committee Report regarding efficient management of public expenditure should also be looked into. 

 

It was suggested that the classification of expenditure into plan and non-plan needs to be re-looked into. It was also suggested that various banking services especially regarding sanction/non-sanction of loans to individuals should be placed under the Citizens’ Charter so that time limit is fixed for delivery of specific services.

 

Among the leading economists who attended pre-budgetary consultation meeting with finance minister included Dr. Surjit Bhalla from OXUS Research and Invests, Dr. Rajiv Kumar, FICCI, Dr. Sudipto Mundle, NIPFP, Bharat Ramaswamy, ISI, Delhi, Ajit Ranade, Aditya Birla Group, Dr. M. Govind Rao, NIPFP, Prof. Rohini Somanathan, Delhi School of Economics and Prof. Amar Yumnam from School of Social Sciences, Manipur. Participating in the discussion, the economists suggested that the primary task of this year’s budget should be to restore a sense of confidence among the investors, both domestic and international in India’s growth story.

 

They asked the finance minister to make this year’s budget a policy budget rather than just a statement of account. Many economists suggested that the message of fiscal consolidation should also be sent through the budget. They suggested that expenditure on populist measures be reduced and the leakages of funds in implementing them be curbed. In this regard they suggested decontrol of diesel, higher excise duty on diesel cars and use of cash transfer system to distribute subsidies directly to the beneficiaries among others. 

 

Certain participants suggested that mega projects which are held up for long may be cleared especially relating to power, mining and steel to send a positive signal to the corporate world. Is FM listening? 

 

Many recommendations from interest groups before the finance minister may be sectoral in nature. But a number of them would also pave the way for policy changes and reforms. 

 

Depending on the robust tax collections the government may initiate welfare scheme or decide to give tax concessions or subsidy. In doing so, any finance minister would ask several questions on accounting and economy but they want to be certain that their budget will pass the test of popularity.

 

Instead of seeing them as interest groups or lobbies, they should be viewed as budget advocacy that will only enhance people’s participation in an annual exercise that concerns a billion plus country and will strengthen roots of Indian democracy and governance.